King & Spalding represents certain lenders to Boardriders as plaintiffs in connection with causes of action brought against Boardriders and certain of its other lenders in connection with a purported priming loan transaction entered into by Boardriders and such lender-defendants. The suit is currently pending in the Supreme Court of the State of New York, County of New York, Commercial Division. Boardriders is a leading action sports and lifestyle company that designs, produces and distributes branded apparel, footwear and accessories for boardriders around the world.
Boardriders is a critically important case as it demonstrates the extreme measures a borrower and majority lenders under a credit agreement could take against a minority group of lenders, namely, the complete subordination of the minority lenders’ loans to new priming loans provided by the majority lenders (while also “rolling up” such majority lenders’ loans ahead of the minority lenders’ loans on a non-pro rata basis), coupled with the complete removal of all customary and market protections afforded lenders (i.e., removing all affirmative and negative covenants, mandatory prepayments and most events of default). The outcome of Boardriders will affect the loan markets ― either with requiring heightened lender protections in loan documents in the event Boardriders prevails, or with tempering the aggressive restructuring tactics utilized by Boardriders and duplicated in other transactions if the ad hoc lenders prevail.